It is a simplified inventory management planning method that provides each distribution facility with an equitable or ‘Fair share’ of available inventory from a common source such as a plant warehouse.
Using fair share allocation rules, the inventory planner determines the amount of inventory that can be allocated to each district center from the available inventory at the plant warehouse. For this example assume that it is desirable to retain 100 units at the plant warehouse, hence 500 units are available for allocation.
DS = common days supply for distribution center inventory.
Aj = inventory units to be allocated from plant warehouse.
Ij = inventory in units for distribution center ‘j’
Dj = daily demand for distribution center j.
n = number of distribution centers.
In this example, DS = 500 + (50+100+75)
10 + 50 +15
= 500 + 225
= 9.67 days
Hence the fair share allocation indicates that each distribution center should be brought up to 9.67 days of stock. The amount to be allocated to each distribution center is determined by:
Aj = (DS – Ij ) x Dj
Aj = amount allocated to distribution center ‘j’.
Ds = days’ supply that each distribution center is brought up to Ij and Dj are as above.
The amount allocated to distribution center 1 in this case:
A1 = (9.67 – 50/10) x 10 = (4.67) x 10 = 46.7 ~ 47 units.
However fair share allocation does not consider site-specific factors such as differences in performance cycle time, EOQ, safety stock requirements.
SKU (Stock keeping unit – it is a specific item purchased by the customer including colour and size uniqueness.)
Latest posts by BMS Team (see all)
- Meterdown Annual Festival is back with its 7th edition – Starts today! - January 16, 2020
- Tybms sem 6 results 2019 declared on 19th June 2019 - June 19, 2019
- TYBMS Sem 6 Results 2019 Update from BMS khabri! - June 15, 2019